GMR airport row: India freezes aid to Maldives, ties under stress

In a move to put pressure on Male, India has frozen aid to the Maldives as its government on Monday decided to take control of the international airport despite a Singapore court staying the suspension of the contract given to India's GMR-led consortium .

The High Court of Singapore suspended the Maldives government's decision last week to terminate the $500 million contract, the single largest Indian FDI in the Maldives, awarded to the consortium for developing the Ibrahim Nasir International Airport at Male.

"High Court of Singapore today (Monday) granted injunctive relief (stayed) against the applicability and operations of (contract termination) letter issued by the Ministry of Finance and Treasury (MoFT), government of Maldives," GMR said in a statement.

"The High Court upon hearing both the parties was pleased to grant this stay in favour of GMIAL (consortium of GMR-MAHB)."

However, the arbitration process will continue on the sidelines, said a company official.

The Singapore High Court is acting as an arbitrator in the issue between the GMR-backed consortium GMIAL and the Maldives government. Under the contract, the law of either Singapore or Britain would apply in case of differences between parties.

The Maldives government, however, chose to defy the order. "We will continue the airport takeover and Inshallah next Saturday onwards MACL (state-controlled Maldives Airport Company Ltd) will be running the airport," Defence Minister and Acting Transport Minister Mohamed Nazim told reporters in Male Monday.

Upset at the Maldives government's attitude, India has put on hold $25-million budgetary commitment to Male, said reliable sources Monday.

Bilateral ties will be affected, said the sources.

The Indian government is also studying the court order and its implications, said the sources.

The Maldives government on Wednesday had defended its decision to terminate the GMR contract, saying the deal was dogged by "legal, technical and economic issues". However, in the wake of reaction by the Maldives government on Monday, it seems legal issues were only the fig leaf behind which President Mohamed Waheed was hiding, the sources said.

In New Delhi's assessment, there are many vested interests at work, a veiled allusion to the increasing clout of a pro-China clique that is said to be close to the powers-that-be in Male and has influenced the decision to scrap the GMR contract.

What is more distressing to India, the sources added, is the way a commercial dispute has been used by some fringe elements and political parties in the Maldives to whip up anti-India sentiments.

"It has become an election issue and it has ceased to be a purely commercial matter," said the sources.

Elections are scheduled to be held in the Maldives late next year, but there are indications that they could be held as early as next year. GMIAL, which is a consortium of GMR and Malaysian airports operator MAHB, had won the right to operate and modernise Ibrahim Nasir International Airport in a bidding conducted by IFC, an arm of the World Bank.

The Maldivian cabinet had directed GMIAL to hand over the airport within seven days to MACL. It had also asked GMR to vacate and remove all property from the airport within 30 days.

According to GMR, both MACL and the MoFT, under the concession agreement, "are not allowed to interfere with the rights of the Investor (GMR-MAHB consortium)".

"With this (judgment), GMIAL shall continue to operate the Ibrahim Nasir International Airport as usual as per the provisions of the concession agreement," GMR said.